FOR IMMEDIATE RELEASE
2007-17

Washington, D.C., Feb. 8, 2007 - The Securities and Exchange Commission today charged seven individuals with engaging in an insider trading scheme that netted over $3.7 million in profits and losses avoided over four years. The defendants include a father and his three sons, a family-run hedge fund, and other relatives and friends. The defendants also include accountants and lawyers at some of the nation's largest firms.

The SEC's complaint, filed in federal court in New York, alleges that the father, Zvi Rosenthal, formerly an executive with Taro Pharmaceuticals Industries, tipped his sons with confidential information concerning at least 13 separate Taro announcements, including earnings results and FDA drug approvals. The family pooled their money into a hedge fund in order to help conceal their trading in Taro securities from detection. In addition to trading in Taro stock and options in advance of the announcements, one of the sons tipped his supervisor at his law firm, a friend who worked at an accounting firm, and his father-in-law. Two of the defendants are also charged with using confidential information obtained from their employers, PricewaterhouseCoopers (PwC) and Ernst & Young (E&Y), concerning two possible mergers.

Mark K. Schonfeld, Director of the Commission's Northeast Regional Office, said, "This case is particularly troubling, not just because this appears to have been a 'family business' built on insider trading, but also because the defendants include accountants and lawyers at prominent firms. These are professionals who understand their obligation not to use confidential information for their own benefit."

The Commission's complaint, filed in the U.S. District Court for the Southern District of New York, charges seven individuals, two hedge funds, one investment adviser, and two relief defendants, including the following.

Zvi Rosenthal (Zvi), age 62, was, from 2001 to January 2006, Taro's Vice President of Materials Management and Logistics in Taro's office in Hawthorne, N.Y.

Amir Rosenthal (Amir), age 28, is Zvi's middle son. From September 2004 to April 2006, Amir was a corporate attorney at a large New York-based law firm.

Oren Rosenthal (Oren), age 30, is Zvi's eldest son. From September 2003 to January 2007, Oren was a litigation associate in the New York and Los Angeles offices of a large California-based law firm.

Ayal Rosenthal (Ayal), age 26, is Zvi's youngest son and a certified public accountant. From 2001 to May 2006, Ayal worked at PwC, first as an auditor and, subsequently, in the Transactions Services Group.

Young Kim (Kim), age 34, was Amir's supervisor at a large New York-based law firm where he was a corporate attorney in the Structured Finance Group.

The Taro Scheme

In its complaint, the Commission alleged that Zvi, a Vice President at Taro, abused his position at Taro by systematically stealing material, nonpublic information concerning 13 separate company announcements, including earnings results and pending generic drug approvals by the Food and Drug Administration. Typically, Zvi provided information to Amir who traded in personal accounts he controlled, and in Aragon's account. Amir also tipped his brothers, Oren and Ayal; his father-in-law, Delshad; his best friend, Heyman; and his work supervisor, Kim, with information he received from Zvi, and each of them traded. Allegations of the Taro scheme include the following.

Taro's internal policies specifically prohibited Zvi or any member of his family from trading in Taro securities during specific blackout periods before and after public earnings announcements.

The defendants aggressively traded Taro options instead of Taro stock to maximize their profits on the information Zvi stole from Taro. In some instances, the defendants liquidated stock positions and bought options to maximize profits.

In 2003, Amir created a hedge fund and an unregistered investment adviser, Aragon, to obscure the family's identity and pool money from family members to trade in Taro securities. Amir also used his wife's account to hide the identity of his trades.

Two of the defendants paid kickbacks to Amir in exchange for profitable tips. Heyman gave Amir at least $6,300 in cash to pay for a plasma television. Delshad paid Amir $66,000 in $11,000 installments that Delshad routed through his children.

Insider Trading in Other Securities

In its later stages, certain defendants broadened the scheme to include trading on nonpublic information stolen from entities other than Taro. On at least two occasions, Ayal and Heyman misappropriated material, nonpublic information concerning impending mergers from their respective employers, PwC and E&Y, and tipped Amir with the information. Amir immediately traded on the information using Aragon's account. Amir also tipped Kim with the information from Ayal and Heyman, and Kim traded on the information.

The insider trading scheme generated for the defendants total profits and losses avoided in excess of $3.7 million.

The complaint charges all of the defendants with illegal insider trading in violation of the antifraud provisions of the federal securities laws. In its complaint, the Commission seeks permanent injunctive relief, disgorgement of all illegal profits and losses avoided plus prejudgment interest, and the imposition of civil monetary penalties. The complaint also seeks an officer and director bar against Zvi.

The Commission has reached an agreement with Kim to settle the insider trading charges against him. Kim has consented to a final judgment permanently enjoining him from future violations of the antifraud provisions of the federal securities laws, and ordering him to pay $4,287.71 in disgorgement of his ill-gotten gains plus prejudgment interest, and $41,702.29 in civil penalties. Kim consented to the final judgment without admitting or denying the allegations in the complaint. The Commission will file the proposed judgment with the U.S. District Court in New York, New York for consideration and approval.

The Commission appreciates the cooperation of the United States Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation in the investigation of this matter.